In this article, we will see How did Tiktok make money?
Introduction
You might’ve heard of this big tech giant TikTok, a video-making and sharing app. In 2019, TikTok’s parent company ByteDance made 17 billion out of which 3 billion is a pure profit. Let’s look into it that how this big tech company managed to make billions of dollars since it’s a free app and what exactly they’ve done to become what they’re.
Since it’s a free app for anyone and everywhere, they’ve opted strategies to make such huge revenues out of those videos. Advertising and In-App Purchases are two main elements of their strategy. Advertising is the way that almost every social media platform use including TikTok to make money, as it has such a huge engaged audience and eyeballs, it allows brands and companies to get in front of these audiences and in return, they made them pay a handsome amount of money. The second way is the In-App Purchases so, if you’re a user even though the app is free to use for everyone and if you like someone’s content you can actually buy coins on TikTok and send it to people whose content you like it’s like a way of showing appreciation.
What exactly Tiktok is?
TikTok launched in the year 2016 and till 2018 the application gained popularity and became the most downloaded app in the USA. TikTok is one of the most popular social media platforms on the planet allowing its users to upload 15-second videos that they can share with the world. Trends include lip-syncing to an archive of popular songs, dancing, and collaborations allowing the users to do it with someone by replying to their video. Creating an account and logging into it on TikTok is no different than any other such platforms such as Instagram or Facebook. The more you scroll the videos and spend time on them the more you’ll get trapped into the algorithm. It’s just a very random app with very random things and trends you really don’t know that what you’ll be going to see next. It’s really is a smorgasbord of weird, creative, amazing, and bizarre videos that you’ve ever come across. As a consumer, you really have a lot of content to consume but as a creator, you have a huge archive of music to choose from and plenty of effects that you can apply to your videos. As per the official stats, there’re 100 million TikTok users in the USA (monthly) and the user growth over 2020 in the USA alone was about 85.3%. TikTok’s 2020 revenue is estimated at $1 billion and its total value is approximately $50 billion as per the research analytics of Reuters.
How does TikTok generate billions from videos?
If you don’t have yet got the point of generating a hell of a lot of money and at the same time being a platform that is free to all, don’t worry now you’ll know!
Advertisements at TikTok
The popularity of TikTok makes it an open platform for millions of users to engage themselves on it by making and sharing videos and at the same time allowing brands, advertisers, companies to get into the front of these audiences via TikTok. The advertisers use this metric called CPM (Cost Per Millie) which tells you that how much does it costs you to show your Advertisement to a thousand people. The CPM for TikTok is around $10 which is comparable but a bit higher than Instagram which is $8. TikTok has a bunch of advertising products that it sells to brands and companies. Let’s talk about what they’re:-
Infeed Videos
Infeed video advertisement means that while you’re scrolling, a brand can pay TikTok to show you a 60-seconds Ad in your feed. Infeed video advertisement is a great way for advertisers to reach the community on TikTok through fun and informative videos.
The brand hashtag challenges
A brand can create challenges to engage with the users and encourage them to create videos around a certain kind of hashtag and these hashtag challenges last about six days. For instance, let me give you an example of one such hashtag revolution thing that had happened back in the year 2019, chipotle created the hashtag challenge #ChipotleLidFlip and the whole point of this was to encourage users to try to flip the lids of their burrito balls on top of the burrito balls itself. Thousands and thousands of people created these videos and it ended up breaking in 230 million views and that’s a lot!.
Top view and brand takeover Ads
Both are essentially the same things but with just the tiny difference as soon as you open the app you’ll see a quick video of three-five seconds about a brand is a top view Ad. The only difference is that the top view is swipeable as you can just simply wipe them away and the takeovers are not.
Branded lenses
As it’s a video-based app so while making videos you can also apply filters, different types of lenses just like Snapchat. So, brands can pay to have custom lenses, sponsored lenses, emojis, and anything that can catch the eyeballs. And the best thing to do this is to combine it with the other challenges, or any other thing that they’ve gone on in the app, and by this, they can last the length of the campaign.
Brand Scan
Now, this is the coolest among all of them, TikTok recently has launched something called brand scan. This allows brands to place their products in an actual user’s video even if the product was not there when the video was shot, they do this using augmented reality. Pretty cool, isn’t it?
TikTok for Business
In June 2020, TikTok has also relaunched all of its marketing tools under one umbrella product called TikTok for business. This makes the whole process super easy for the brands and the advertising agencies to work together in a much more seamless way to plan and place the Ads across the platform. This can be monumental and can also result in the placement of more Ads on the platform.
So, now let’s talk about the second way through which TikTok makes money and that is In-App Purchases.
In-App Purchases
You can buy coins and send them to other people on TikTok. So, you can use these coins to buy virtual gifts which include special stickers, emojis that you can gift to other people and if you receive a gift then it’ll convert into things like diamonds and if you’ve enough diamonds then you can cash them out into actual hard cash. So, you can see that why these In-App Purchases are so much popular among TikTok users. Especially when the majority of the TikTok users are between the ages of 16 and 24, and this generation is a fan of collaborating with each other, showing appreciation for each other, creating positive reinforcement, and all this good stuff. They’re in the habit of buying these coins and sending gifts to each other and here’s the catch when you see others buying coins and sending virtual gifts to each other you also want to do the same. So, it’s a kind of a cyclical effect that just results in more money for TikTok.
The pricing model of TikTok
The platform offers a variety of pricing models, from which a brand or advertiser can choose from:-
- Cost Per Millie- It is also known as Cost Per View (CPW). CPM, when it comes to marketing and advertising is the cost per 1000 Ad impressions. So, every time an advertiser has their Ad shown 1000 times the cost for those impressions is the CPM.
- Cost Per Click- CPC is the average cost per Ad click, TikTok charges the advertisers according to this. The charges are basically based on per click of an advertiser.
- Cost Per Action- CPA is the amount of money you spin in order to take a specific action or to acquire a new customer and that action doesn’t have to necessarily be a sale it can be something like filling out a form or anything like that. And this is the same thing that TikTok includes in it’s pricing model.
Conclusion
So, how much money is this TikTok app is making? Well, TikTok’s parent company ByteDance is valued at nearly a hundred billion dollars. In 2019, it made $17 billion out of which $3 billion was a pure profit adding more it, Forbes estimated that TikTok alone generated about $175 million in 2019. Allow me to enlighten you with one of the most amazing facts that in the first quarter of 2020 Bytedance alone generated around $5.6 billion in revenues which means if they keep that trajectory going they’ll be going to leave all the other social media platforms behind.
Frequently asked questions
- Who owns TikTok?
Ans- TikTok is a Chinese video-making and sharing app. Its parent company is ByteDance.
- Revenue generated by TikTok in the year 2020?
Ans- TikTok made a business of approximately $1 billion in 2020.
- Who’re the investors of TikTok?
Ans- K3Ventures and Music.ly are the two main investors of TikTok.
